Last week, the Maryland Senate passed legislation amending Maryland’s False Claims Act. While the bill passed with nearly a unanimous vote of 46-1, Maryland’s False Claims Act has a long way to go to truly fight fraud and protect tax payer funds.
What is the False Claims Act?
Generally, False Claims Act (FCA) laws allow private citizens or whistleblowers to bring lawsuits alleging fraud against government. There is the federal FCA statute and most states have variations of the law. To incentivize these private suits, the federal statute and many state statutes award the whistleblower a portion of any fraudulent funds that are returned to the government. The reward can be lucrative to the whistleblower. However, the whistleblower may face significant professional and personal risks, including retaliation and industry “black balling.”
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MD FCA Improvement
Most states have passed FCA laws that mirror the federal statute, which include anti-retaliation provisions. And some states have FCA statutes that go even further than the federal law, for example New York State’s FCA. This state False Claims Act law allows whistleblowers to file tax fraud cases under the state FCA. Maryland has chosen to be much more restrictive. Maryland’s original FCA was restricted to health care only, which at the state level means Medicaid funds only. While health care fraud historically has been the lion’s share of recoveries under FCA laws (nearly 60% of the federal FCArecoveries involve health care fraud), this restriction does not address the litany of other areas of government fraud. The amendments passed by the Maryland Senate addressed this issue by expanding the Maryland FCA to include all types of government fraud.
MD FCA Flaw
However, the Maryland FCA has a glaring flaw: it does not allow for a private right of action. In other words, the federal FCA and most state FCA’s allow a whistleblower and counsel to litigate fraud cases on their own without government intervention. Under FCA statutes the government investigates the claims of the whistleblower and can “intervene” or take over the lawsuit and its prosecution. However, in a majority of these lawsuits the government does not and cannot “intervene.” In this day in age of government budgetary concerns, intervention decisions are typically resource-based, meaning not all viable fraud cases under the FCA proceed as government intervened actions. A private right of action is a mandatory provision in an FCA statute if it is going to truly attempt to prevent fraud.
Private Action is Needed
Ashcraft & Gerel has an active caseload of non-intervened FCA cases. We have resolved several types of these cases, returning millions of dollars to the government that otherwise would not have been returned if it were not for the private right of action contained in the “qui tam” provisions of the federal FCA. It is critical to Maryland’s FCA to further expand to include this private right of action if state funds are to be actually protected against fraud. Doing so would allow for more whistleblowers to step forward under the state FCA, potentially returning taxpayer funds to the government.